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What Happens if Your House Burns Down in a Wildfire?

What are the top questions we are getting right now when it comes to the recent wildfires? Some of the answers may not be what you think.

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Wildfires are devastating natural disasters that can leave homeowners grappling with not only emotional loss but also complex financial and legal questions. One common concern is, “What happens if my house burns down in a wildfire?” Here’s what you need to know about mortgages, property taxes, and your rights under California law.

Do You Still Have to Pay Your Mortgage?

Even if your home is destroyed, you are still responsible for your mortgage payments. Think of it like financing a car—if your car is stolen, the loan doesn’t disappear. However, if you’re unable to make payments due to the disaster, you might qualify for forbearance, which temporarily pauses your mortgage payments.

To apply for forbearance, contact your mortgage servicer (the company handling your payments) rather than the original lender. Be prepared to provide documentation of the damage. Keep in mind that forbearance doesn’t eliminate your debt; the missed payments are added to the end of your loan, and interest continues to accrue.

What About Property Taxes?

Under California law, if your property suffers over $10,000 in damage, you can request a temporary deferral of property taxes. However, this doesn’t erase the obligation. The value of the land remains taxable, even if the home is gone.

Here’s an important note: California’s Prop 13 protections still apply. If you’ve been paying reduced property taxes based on the assessed value of your home, those protections remain in place when you rebuild, as long as the new structure is similar in size and use. You can even increase the size of your home by up to 20% without triggering a reassessment.

Rebuilding and Insurance

Your homeowner’s insurance plays a vital role in rebuilding after a wildfire. Ensure your policy includes replacement cost coverage to rebuild your home to its former state. Review your policy limits to make sure they reflect current construction costs, especially given inflation.

Insurance may also cover temporary living expenses while your home is being rebuilt. Check with your provider to understand the specifics of your policy and the claims process.

Watch Out for Price Gouging

After a wildfire, many displaced homeowners turn to rentals while rebuilding. Unfortunately, some landlords may exploit the situation by drastically increasing rent prices. California law prohibits price hikes of more than 10% after a disaster, classifying higher increases as price gouging, which is illegal.

If you encounter unfair rental practices, report them to your local authorities. This ensures accountability and prevents further exploitation during an already stressful time.

Final Thoughts

Experiencing a wildfire’s destruction is overwhelming, but understanding your options can help you navigate the aftermath. Communicate with your mortgage servicer, county tax assessor, and insurance company to ensure you’re maximizing available assistance. If you have questions about your property or rights as a homeowner, don’t hesitate to reach out for expert advice.

Remember, preparation is key. Regularly review your insurance coverage, maintain a fire-resistant landscape, and have an evacuation plan in place to protect yourself and your loved ones.

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